Consequences of lending to family
What would you do if someone from your family or friend circle asked to borrow money? Would you like to do it at the drop of a hat? Or would you avoid it? Most people face this situation at some point, so it is essential to know how to react when lending to family or friends.
According to a report, most Americans have assisted their loved ones financially. The same report suggests that this ended badly for nearly half of them.
Despite good intentions, lending to a friend or family member often leads to some serious consequences. Let’s explore them in this blog post!
Vague Terms and Conditions
This is a major consequence of lending to family and relatives. Such lending is usually finalized instantly over a cup of tea, so it is often not possible to put clear terms and conditions on paper. As a result, disputes and arguments could take place due to the lack of any proper agreement or paperwork in the first place.
Sheer Awkwardness
There can be a subconscious feeling of indebtedness when you meet a friend or relative to whom you have lent money. You might ask whether he/she is working towards repaying the loan, but it is likely to embarrass the borrower by mentioning the same thing every time you meet. This awkwardness can harm your friendship or relationship.
Tax Implications
When lending to family or friends, make sure you are aware of all the tax implications. If your loan exceeds $10,000, you will have to have a written agreement in place, outlining the terms and minimum interest rate. To avoid this hassle, consider gifting the money to a family member. As of 2022, you can gift an individual up to $16,000 without incurring any gift tax.
Record-Keeping
Meticulous record-keeping of the loan and repayments can make a huge difference when it comes to keeping your family-friend loan experience trouble-free. From the initial principle of each payment to tracking each transaction, you need a system that allows both parties to see each transaction as it is logged.
What’s the Solution?
In the pursuit to streamline the complicated and awkward process of obtaining and lending personal loans, Janji-Ku was born! This mobile app is designed to make borrowing and lending money between friends and family simpler, fairer, and faster – keeping your relationships intact. The app eliminates the complication of repayments, records, and reminders to ensure that your money is safe and secure.
So, get ready to lend or access capital within your network with dignity and promise. Feel free to contact us to know more about the Janji-Ku app!